HOW ABOUT A STATUE?
Last week Brooks Hilliard wrote: ‘We won WWII before ‘under God’ was added to the Pledge of Allegiance and lost Vietnam afterwards.’ J.R. Pitts responds: ‘We won WWII when children could pray in schools. We lost Vietnam when they couldn’t.’
☞ The author of the pledge, in 1892, as historian Arthur Schlessinger, Jr. tells us, was a former Baptist minister by the name of Francis Bellamy. He saw no need to add God to the pledge, and neither should Congress have in 1954. (I would also not like to see Congress mandate a statue of God beside the Capitol, or a painting praising God in every classroom where the pledge is recited. Religion should be private – and optional. That makes it all the more special for those who choose it.) Was the Ninth Circuit correct in its ruling? I believe it was. Should we get all upset when the Supreme Court presumably overturns it? Nah. It’s just not that big a deal.
HOW ABOUT AN INVESTIGATION?
Martha’s in some hot water for selling about $228,000 worth of ImClone stock, allegedly on the basis of inside information. It’s the story that won’t go away. She’s not just nobody, after all – she’s Martha Stewart! Well, thus far, George W.’s not in much hot water for selling $828,000 worth of Harken Oil stock on what would also appear to have been the basis of inside information. It’s the story that won’t make Page One. And yet he’s not nobody, either – he’s President of the United States!
I think the story may finally be gaining traction, as it should. Not because any of us want to start talking about impeachment again – been there, done that (and this hardly qualifies as treason) – but because insider trading undermines public confidence in our capital markets.
George W. got a complete pass on this as a candidate for president, because, as he told reporters, this had all been hashed out before and he had been exonerated. (Not sure if he wagged his finger when he said that, but he said it.)
Well, but no, it turns out he was not exonerated.
Here are some things to know about the case:
1. W. was clearly an insider – he was on Harken’s Board of Directors! He was on Harken’s three-man Audit Committee! He was on a special ‘restructuring’ committee! As U.S. News reported in 1992:
“Bush sold [his entire] $828,560 worth of Harken stock just one week before the company posted unusually poor quarterly earnings and Harken stock plunged sharply. Shares lost more than 60% of their value over 6 months. When Bush sold his shares, he was a member of a company committee studying the effect of Harken’s restructuring, a move to appease anxious creditors. According to documents on file with the Securities and Exchange Commission, his position on the Harken committee gave Bush detailed knowledge of the company’s deteriorating financial condition. The SEC received word of Bush’s trade eight month’s late. Bush has said he filed the notice but that it was lost. “
2. According to Paul Krugman in the Times yesterday, ‘another member of both committees, E. Stuart Watson, assured reporters that he and Mr. Bush were constantly made aware of the company’s finances.’ If so, Mr. Bush clearly knew inside information about the impending bad news that the public did not know when he sold his stock. Trading on inside information, especially by a company officer, is considered a fairly serious white-collar crime.
3. But it gets worse. Apparently, according to Krugman, Harken kept its stock up ‘just long enough for Mr. Bush to sell most of his stake at a large profit – with an accounting trick identical to one of the main ploys used by Enron a decade later. (Yes, Arthur Andersen was the accountant.)’ The trick involved setting up a seemingly independent entity to buy a Harken subsidiary for a much-inflated price, thereby to boost Harken’s reported profits (or in this case, reduce its reported losses). And where did the money come from to make that purchase? It was borrowed from Harken itself. Accounting fraud, if that’s what this was, is considered a fairly serious white-collar crime. Any director who was aware of it, I would think, would bear some complicity.
4. Mr. Bush neglected to report this insider trade to the SEC as required by law until something like 34 weeks past the deadline (at first saying he had filed but that it had gotten lost at the SEC, later saying, well, no, it was his lawyer’s fault). Perhaps if this had been just one of dozens of small sales Mr. Bush had made his failure to report it could have been just something that, well, got lost in the shuffle – a more or less trivial transaction that he might not have given two thoughts about. But if I’ve been reading the press reports right, this sale was the largest score of his life up to that time. So failure to report the highly suspect insider sale properly may not be all that trivial and was perhaps even intentional.
5. Matt Miller’s July 3rd column argues for the legitimacy of our looking into all of this. Among other things, it recaps some tidbits from a long February, 2000, Harper’s article by Joe Conason. It seems that, yes, the SEC looked into the Harken matter, but that, no, Mr. Bush wasn’t exonerated. Rather, the investigation was simply dropped. According to Conason, says Miller, the ‘investigation’ (Miller puts ‘investigation’ in what an early editor of mine used to refer to as ‘snicker quotes’) was conducted ‘by an SEC headed by a pal of Bush’s father whom dad appointed to his job.’ And the SEC’s general counsel at the time was none other than the Texas attorney who had handled the sale of the Texas Rangers for W. and his partners in 1989. Concludes Miller: ‘In the third world, given such circumstances, we’d say the fix was in. Anyone for an independent look this time?’
And I will listen with interest to the President’s speech, scheduled for tomorrow, in which he is expected to come down hard on those who abuse the public markets for their own financial gain.
I wonder if he will call for an investigation of Halliburton’s suspect accounting during the Cheney reign, too.
Quote of the Day
Selling a soybean contract short is worth two years at the Harvard Business School.~Robert Stovall
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